Fujisawa Toyama Group has reported that gold is out outperforming bonds and equities as investors are now seeking safe haven assets. The precious metal, which is used as a store of value by investors in times of uncertainty, had risen more than 5% this month and broke above $1,900 a troy ounce on Friday before settling back to $1,888.
The ongoing situation in Ukraine has fueled the rally, although analysts at Fujisawa Toyama Group believe that gold is also benefiting from fears that U.S. growth could slow as the Federal Reserve is compelled to act forcefully to keep inflation under control.
"The possibility of an inflation-induced monetary policy error and heightened recession risks are providing gold with a solid start to the year," said Anthony Stone, the longstanding Director of Global Securities at Fujisawa Toyama Group. "Our brokers are recommending gold as a portfolio diversifier and as a hedge while this period of increased geopolitical tension and rising inflation continues."
Concerns about the economic outlook and rising prices are causing the relationship between gold and inflation-adjusted "real" interest rates to weaken.
In general, real rates are negatively correlated with gold. This is because non-interest-bearing assets, such as gold become less appealing when interest rates rise. However, that has not been the case this year. As real rates have climbed, the gold price has remained resilient.
"As weaker U.S. economic data starts to flow through, we expect gold exchange-traded fund inflows to intensify as our clients shift some of their assets from equities into gold," said Fujisawa Toyama Group's Head of Equities Trading, Thomas Carter.
While gold's price fluctuated around the $1,700-$1,900 range throughout 2021, the start of this new tightening cycle might just be the catalyst that spurs the next gold bull run.
About Fujisawa Toyama Group
As an independent financial services company, we work with worldwide clients to discover what their financial goals are — putting strategies together to ensure these goals can be reached. Fujisawa Toyama Group's wealth advisors are experienced professionals who know how markets behave and will help you identify your risk profile so that you can make more informed decisions about both your short-term needs as well as long-term objectives.
Sebastian Warner - Head of Investment Analysis
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Original Source: Fujisawa Toyama Group Reports on Gold Rise as Traders Seek Safe Haven Assets